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## GNED 07: The Contemporary World **Instructor:** RENZ PATRICK H. LEDESMA ### Globalization - Refers to the process by which more people across large distances become connected in more different ways. - Ang globalisasyon ay ang mabilis at patuloy na inter-border ng paggalaw ng produkto, serbisyo...

## GNED 07: The Contemporary World **Instructor:** RENZ PATRICK H. LEDESMA ### Globalization - Refers to the process by which more people across large distances become connected in more different ways. - Ang globalisasyon ay ang mabilis at patuloy na inter-border ng paggalaw ng produkto, serbisyo, kapital, teknolohiya, ideya, impormasyon, kultura, at nasyon. - Kalakalan at Teknolohiya - Ang globalisasyon ay taal o naka-ugat sa bawat isa (Nayan Chanda, 2007). ### Timeline of Globalization - Ancient - Medieval - Renaissance - Modern ### Concepts Of Globalization - **Transference** - pagpapalitan o exchange ng mga bagay sa pagitan ng dalawang established units - **Transformation** - ito ay nakababago sa buong sistema. Naapektuhan ang Kalayaan ng isang bansa na umaksyon para sa sarili nya. - **Transcendence** - implies exchange across existing unit boundaries and between units and system, but it still presupposes that this system as well as the units remain identical with themselves throughout the globalizing process. ### Aspects of Globalization | Aspect | Description | |---|---| | Political | Formation of global policy and cooperation | | Cultural | Unification of norms, principles, and values | | Social | Unification of social standard of living | | Economical | Strengthening of the economic integration and interdependence | | Ecological | Degradation of the environment on a planetary scale | | Technological | The cross-cultural development and exchange of technology. The speed with which culture is diffused has changed as a result of technological advances. | ### Theories of Globalization - **World System Theory** - An economic development theory. It seeks to answer the question: Why is economic development not equal? - **World Polity Theory** - Conceptualized as a network of states, societies, and international governmental organizations. State remains as an important component but attention goes to global organizations. - **World Culture Theory** - An approach of globalization cultivates principles (ideologies, philosophies, meanings, values) that go beyond from local contexts and local histories. ### Isyu - Tuwiran nitong binago, binabago, at hinahamon ang pamumuhay at mga perennial institutions na matagal nang naitatag. ### Quote - "Globalization is incredibly efficient but also so far incredibly unjust" - Pascal Lamy ### State - Defined as a politically organized sovereign community independent of outside control bound by penalties of nationhood, legally supreme within its territory, acting through a government functioning under a regime of law (CIR v. Campos Rueda, GR No. L-13250, October 29, 1971). ### State vs Nation - State is a legal or juridical concept while a nation is an ethnic or cultural concept. - Nation refers to those people belonging to the same race and is embraced with a common cultural heritage. - The state in order for it to be considered as a state needs the presence of the four elements. ### Four Elements of State 1. People 2. Territory 3. Government 4. Sovereignty ### People - Inhabitants or population of the state - A community of person sufficient in number and capable of maintaining the permanent existence of the community and held together by a common bond of law. ### Territory - The definite portion of the Earth where people reside and must be capable of sustaining of its inhabitants. - It is ideal for a state's territory to be large enough to sustain the needs of its inhabitants and must also be small enough for it to be easily administered and defended. - Article I section 1 of the 1987 Philippine Constitution ### National Territory - Terrestrial Domain - Fluvial Domain (Internal or National Water, Territorial Sea, Exclusive Economic Zone, High Seas) - Aerial Domain ### Modes of Acquiring Territory - Discovery and Occupation - Cession - Accretion - Prescription - Conquest ### Government - The institution inside the state that is composed of the body or entity that provides for the policies that govern the entirely of state affairs and thus by doing so acts as the agent through which the state acts. - Doctrine of Parens Patriae - guardian of the people. ### Different Kinds/Forms of Government #### As To The Number of Rulers - **Monarchy** - Kind of government that has a single ruler that has been referred to as the monarch - **Aristocracy** - The power to govern rests on the hands of the few called aristocrats - **Democracy** - Rule of the people ### Sovereignty - Simply means independence or freedom from outside control in the conduct of domestic and foreign affairs of the state. - The ultimate power of the state to govern itself ### Inherent Power of The State - The three inherent power of the state can exist without the mandate of law or a constitution - The state cannot exist without its inherent power - Fundamental power of the state - due to their immediate importance to the continuing existence of the state ### Inherent Power of The State - **Police Power** - The most pervasive and the least limitable of all the inherent powers - **Power of Eminent Domain** - The power of the state to take any kind of private property provided it is for public welfare with the payment of just and reasonable compensation - **Power of Taxation** - The Power in which taxes (proportional contribution paid by the inhabitants of the state) are collected. ### Other Important Components in Interstate System - **International Organizations** - Global/Universal - World Bank; United Nations Educational, Scientific, and Cultural Organization (UNESCO) - Regional - United Nations (UN); Asia-Pacific Economic Community (APEC); European Union (EU) - Purposive - General or multipurpose (EU, UN); Specific (WHO) - **International Non-Governmental Organizations** - Independent of governments and can be seen as two types: advocacy NGOs, which aim to influence governments with a specific goal, and operational NGOs, which provide services - Examples of NGO mandates are environmental preservation, human rights promotions, or the advancement of women. - **Multinational Corporations** - Is a company that has business operations in at least one country other than its home country. - Generally, a multinational company has offices, factories, or other facilities in different countries around the world as well as a centralized headquarters which coordinates global management. - **Religious Organizations** - A pie chart demonstrating the distribution of common religions including Christianity, Islam, unaffiliated, Hinduism, Buddhism, Folk religions, and Other religions. - **Private Individuals** - A table listing private individuals that have been considered significant from 2000 to 2020. ### Theories in International Relations - **Realism** - Popularized by E.H. Carr, Hans Morgenthau, George F. Kenna, and Reinhold Niebuhr. - Inspired from the philosophy of Thucydides, St. Augustine, Niccolo Machiavelli, and Thomas Hobbes. - In the discipline of International Relations (IR), realism is a school of thought that emphasizes the competitive and conflictual side of international relations. - The first assumption of realism is that the nation-state (usually abbreviated to 'state') is the principle actor in international relations. Other bodies exist, such as individuals and organisations, but their power is limited. - Second, the state is a unitary actor. National interests, especially in times of war, lead the state to speak and act with one voice - Third, decision-makers are rational actors in the sense that rational decision-making leads to the pursuit of the national interest. Here, taking actions that would make your state weak or vulnerable would not be rational. - Finally, states live in a context of anarchy - that is, in the absence of anyone being in charge internationally. The often-used analogy of there being 'no one to call' in an international emergency helps to underline this point. - **Liberalism** - Proposed by Dante Alighiere in his book "Monarchy" during the 4th century, promoted by US President Woodrow Wilson during the 20th century in his role in the establishment of League of Nations after the WW1. - A defining feature of modern democracy, illustrated by the prevalence of the term 'liberal democracy' as a way to describe countries with free and fair elections, rule of law and protected civil liberties. - Is based on the moral argument that ensuring the right of an individual person to life, liberty and property is the highest goal of government. - Consequently, liberals emphasize the wellbeing of the individual as the fundamental building block of a just political system. - A core argument of liberalism is that concentrations of unaccountable violent power are the fundamental threat to individual liberty and must be restrained. - **Liberalism vs. Realism** | Issue | Liberalism | Realism | |---|---|---| | Human Nature | Good, altruistic | Evil, selfish | | Central Problem | War and the establishment of peace | War and security | | Key Actors | States, Individuals, Institutions | States | | Actor Motives | Mutual assistance, collaboration | Power, national security, self-interest | | Interests | Long-term, collective | Short-term, individual | | Nature of IR | Cooperation, community | Anarchy | | Nature of conflict | Irrational | Rational | - A cartoon illustrating the difference between liberalism and realism. A happy person with a sun behind them is labeled "Liberalism" and a frowning person with a storm cloud above them is labeled "Realism". ### Interdependence - Important role of International Organizations, International Non-Governmental Organizations, Multinational Corporations, Religious Organizations - Pagtutulungan - Diplomacy over military power ### Dependence - Based on the the philosophy of Karl Marx - World System Theory - Capitalist System ### Economics - A social science that focuses on the production, distribution, and consumption of goods and services, and analyzes the choices that individuals, businesses, governments, and nations make to allocate resources. - Assuming humans have unlimited wants within a world of limited means, economists analyze how resources are allocated for production, distribution, and consumption. ### Pandaigdigang Ekonomiya - It is the result of human innovation and technological progress. It is characterized by the increasing integration of economies around the world through the movement of goods, services, and capital across borders. (IMF, 2008). - Kalakalan ng mga produkto at serbisyo; pamilihan ng mga pananalapi at puhunan; teknolohiya at talastasan; produkto o paggawa. ### Globalisasyon vs Internalisasyon - Localization is the adaptation of a particular product or service to one of those markets. - Globalization refers to the processes by which a company brings its business to the rest of the world. - Internationalization is the practice of designing products, services and internal operations to facilitate expansion into international markets. ### Pinagmulan ng Globalisasyon (International Trading Systems) - **Silk Road (Silk Route)** - First global trade route in history - 1,500 years; 130 B.C.E. until 1453 C.E. - 6,437 kilometers (4,000 miles) - It is hard to overstate the importance of the Silk Road on history. Religion and ideas spread along the Silk Road just as fluidly as goods. Towns along the route grew into multicultural cities. The exchange of information gave rise to new technologies and innovations that would change the world. - A map illustrating the Silk Road is shown along with the countries and bodies of water that are part of the route. - A detailed map of the Silk Road is shown along with specific locations within China, India, Persia and Arabia. - **Galleon Trade** - Took place during the age of mercantilism (16th – 18th century) - Spanish sailing vessel that made an annual round trip (one vessel per year) across the Pacific between Manila, in the Philippines, and Acapulco, in present Mexico, during the period 1565-1815. They were the sole means of communication between Spain and its Philippine colony and served as an economic lifeline for the Spaniards in Manila. - A map illustrating the Galleon trade route between Manila and Seville is shown. ### International Monetary System - Provides the institutional framework for determining the rules and procedures for international payments, determination of exchange rates, and movement of capital. - **Era Of Bimetallism** - Before 1870, where both gold and silver coins were used as the international modes of payment. The exchange rates among currencies were determined by their gold or silver contents. Some countries were either on a gold or a silver standard. - **Gintong Pamantayan** - 1875-1914, gold alone is assured of unrestricted coinage. There was a two-way convertibility between gold and national currencies at a stable ratio. - The gold standard is a monetary system in which paper money is freely convertible into a fixed amount of gold. - Pinaniniwalaan na ginagarantiyahan nito ang isang walang implasyon, matibay na kapaligirang pangkalakalan, at isang epektibong makinarya sa isang mabilis na pandaigdigang kalakalan. - U.S. dollars were convertible to gold at a rate of $20.67 per ounce. - **Advantages** - The gold standard prevents inflation as governments and banks are unable to manipulate the money supply (e.g., overissuing money). The gold standard also stabilizes prices and foreign exchange rates. - **Disadvantages** - Under the gold standard, the supply of gold cannot keep pace with its demand, and it is not flexible under trying economic times. Also, mining gold is costly and creates negative environmental externalities. - "We have gold because we cannot trust governments," -President Herbert Hoover (1933) - **Bretton Woods System** - The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44 countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire. - Gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar's value - Goals of creating an efficient foreign exchange system, preventing competitive devaluations of currencies, and promoting international economic growth. - $35 per ounce - **International Monetary Fund (IMF)** - to monitor exchange rates and identify nations that needed global monetary support. - **World Bank** - to manage funds available for providing assistance to countries that had been physically and financially devastated by World War II. - **Fiat Monetary System** - “Fiat” is a Latin word that is often translated as "it shall be" or "let it be done." - Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. - The value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government. - Floating rate system - **Floating Rate System** - A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. - Floating exchange rates became more popular after the failure of the gold standard and the Bretton Woods agreement - **Advantages of Fiat Money** - Gives central banks greater control over the economy - Is cost-efficient to produce - Provides governments with flexibility - **Disadvantages of Fiat Money** - Is not a fool-proof way to protect the economy - Creates opportunity for a bubble - Provides risk of inflation - **Quote** - "We accepted money as the medium by which things are exchanged, not the value for which they are." ### Market - Is a place where parties can gather to facilitate the exchange of goods and services. The parties involved are usually buyers and sellers. The market may be physical, like a retail outlet, where people meet face-to-face, or virtual, like an online market, where there is no physical presence or contact between buyers and sellers. - Establish the prices of goods and services, determined by supply and demand. ### Market Structure - Perfect Competition - Monopolistic Competition - Oligopoly - Monopoly ### Types of Markets - **Underground Market** - an illegal market where transactions occur without the knowledge of the government or other regulatory agencies. - **Auction Market** - The buyers or bidders try to top each other for the purchase price. The items for sale go to the highest bidder - **Financial Market** - any place where securities, currencies, and bonds are traded between two parties. These markets are the basis of capitalist societies, providing capital formation and liquidity for businesses. ### Integration - The action or process of combining two or more things in an effective way - Ang proseso na pinagsama-sama ang magkakahiwalay na nasyonal na ekonomiya patungo sa mas malaking pang-ekonomikong rehiyon (Koester, n.d.). ### Market Integration - Markets are integrated if prices among different locations move in similar patterns. - Economic integration is an arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. Economic integration aims to reduce costs for both consumers and producers and to increase trade between the countries involved in the agreement. ### Tariffs - A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages. ### Five Dimension of Market Globalization (Cavusgil, 1993) 1. Fluid nature of manufacturing and sourcing activities 2. Increase in level of competition between consumer and market due to globalization. 3. Increase in international transactions 4. Technological advancement 5. Borrowing-financing ### 2 Types if Integration - **Positive Integration** - pakikibahagi ng pamahalaan - **Negative Integration** - hindi panghihimasok ng pamahalaan. ### Preferential Agreement - Key idea: "believe that more agreements = more trade and growth in developing nations - Countries in trading block give preferential access to products from other member nations - This is done through reducing tariffs, not eliminating it. - These can be bilateral or multilateral. - Example is EU and the African, Caribbean, and Pacific (ACP) group states ### Free Trade Area - A free-trade agreement made between countries, where the countries agreed to trade freely among themselves but are able to trade with other countries outside of the free-trade area in whatever way they wish. - Custom external tariff for non members. - Example is the North American free-trade agreement which comprises of the US, Canada, and Mexico established in 1994 (NAFTA). ### Custom Union - A custom union is an agreement made between countries, where the countries agreed to trade freely among themselves, and they also agreed to adopt common external barriers against any country attempting to import into the custom union. - Putting common external tariff (para sa isang bansa na hindi bahagi ng usapan) which must be on the same amount of tariff. ### Common Market* - A common market is a custom union with common policies on product regulation, and free movement of goods, services, capital, and labor. - Mobilization of labor and capitalist; no restrictions (seamless movement). - Example is the European Union ### Economic Union* - An economic/monetary union is a common market with a common currency and a common central bank. - Countries integrate and collaborate on the level of monetary policy, fiscal policy, and other tax policy as well ### Complete Economic Integration - This would be the final stage of economic integration at which point the individual countries involved would have no control of economic policy, full monetary union, and complete harmonization of fiscal policy. - This is what the eurozone is moving towards ### Law of One Price - Assumption: competitive markets, no transaction costs, no official trade barriers, tradable goods - Is an economic concept that states that the price of an identical asset or commodity will have the same price globally, regardless of location, when certain factors are considered. - The law of one price takes into account a frictionless market, where there are no transaction costs, transportation costs, or legal restrictions, the currency exchange rates are the same, and that there is no price manipulation by buyers or sellers. The law of one price exists because differences between asset prices in different locations would eventually be eliminated due to the arbitrage opportunity. - The law of one price is the foundation of purchasing power parity. Purchasing power parity states that the value of two currencies is equal when a basket of identical goods is priced the same in both countries. It ensures that buyers have the same purchasing power across global markets. ### Purchasing Power - The amount of goods and services you can buy with a certain amount of money - Purchasing power is the value of a currency expressed in terms of the number of goods or services that one unit of money can buy. It can weaken over time due to inflation. That's because rising prices effectively decrease the number of goods or services you can buy. Purchasing power is also known as a currency's buying power. ### Purchasing Power Parity - Is based on the Law of One Price and refers to situation where your income has the same purchasing power in all countries. - PPP is an economic theory that estimates the amount by which an item should be adjusted for parity, given two countries' exchange rates. PPP can be used to compare countries' economic activity, income levels, and other relevant data concerning the cost of living, or possible rates of inflation and deflation.